Amazon Gives Whole Foods Sales a Boost -- WSJ

By Heather Haddon Features Dow Jones Newswires

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 30, 2017).

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Amazon.com Inc. has sold about $1.6 million in Whole Foods beans, breakfast cereal and other store-brand products in the first month since taking over the organic chain, one of the first infusions of cash the e-commerce giant has delivered to the natural grocer through its site.

Amazon completed $500,000 in online sales in the first week after it started offering Whole Foods' "365 Everyday Value" products, according to the One Click Retail, an e-commerce data analytics firm that focuses on the site's transactions. Weekly sales fell to about $300,000 for the next two weeks after Amazon ran low on some products but rebounded in the fourth week, the analysis found.

During the past month, 19% of Whole Food's sales on Amazon were of snacks and candy, followed by frozen fruit and vegetables, One Click found. Condiments and health and beauty items drew the least share of sales. Deli turkey breast and coconut water were the most popular individual items.

Whole Foods brand pasta, packaged meats and other goods already had a loyal following among customers of the chain's 470 stores, with exclusive products accounting for 15% of the company's annual revenue.

But Amazon gives Whole Foods products the potential for a new mass-market platform, providing new revenue to the struggling grocer, grocery analysts said. "When they blow it out, it'll be a much bigger number," said Bob Goldin, partner for the Pentallect Inc. food consultancy.

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The sales at present amount to a tiny portion of the roughly $8 billion in retail sales Amazon averages a month.

A Whole Foods spokeswoman declined to comment. Amazon didn't respond to requests to comment.

The online private-label sales are among the changes Amazon made after taking over Whole Foods on Aug. 28. The online retailer also permanently reduced prices on eggs, milk, bananas and other high-volume items across stores, trying to undo the chain's "Whole Paycheck" image.

Third-party data showed an increase in traffic as curious shoppers flocked to Whole Foods stores several days after the price cuts took effect, but the surge subsequently subsided. It will take additional measures to turn around Whole Foods' two years of steady sales declines, Mr. Goldin said.

Spurred by Amazon's entry, August traffic at Whole Food stores was up 10% from the year's monthly average through July, according to location-based data compiled by the inMarket mobile analytics firm. Traffic is projected to be 4% below average in September, it found.

"I've bought a bit more salmon," said Howard Levy, a 67-year-old retired financial worker, as he left a Whole Foods store in Chicago. Mr. Levy said he is buying more of the grocer's newly discounted fish but still goes to Kroger Co'.s Mariano's chain in the area for many items at less expensive prices.

Amazon and Whole Foods executives have said they planned to institute more discount offers in the months to come. The chain had experienced more than two years of declining same-store sales -- a key retailer metric -- prior to Amazon's deal for Whole Foods in June.

Grocers across the country are fiercely competing on price to lure shoppers to their stores.

Amazon is mass-marketing Whole Foods' store goods at a time American consumers are looking for healthy food sold under private labels. Of 2,764 shoppers surveyed by the Bain & Co. data firm this year, 85% said they were open to trying private-label goods, which typically are less expensive.

Store brands accounted for more than $150 billion in grocery sales last year, according to the Private Label Manufacturers Association.

Amazon's online sales of Whole Foods products could be a more direct driver of profit given their brand recognition and the strong margins for private-label goods, said Diana Sheehan, director of Retail Insights at the Kantar Retail consultancy. "This is probably one of the most valuable things they got from Whole Foods," Ms. Sheehan said. "The 365 private label has probably some of the strongest brand equity in the nation."

Amazon will need to work on its supply issues of Whole Foods products, said Nathan Rigby, vice president of sales and marketing for One Click Retail. The online retailer hasn't marketed the goods much, nor made the bulk of them available beyond users of the site's Fresh and Pantry services, Mr. Rigby said.

"I buy a lot of 365 items," said Kai Rose, a Chicago tech worker and mother of a 9-month-old, who had yet to hear about the Whole Foods goods being sold online. "I will definitely be buying them on Amazon."

Write to Heather Haddon at heather.haddon@wsj.com

(END) Dow Jones Newswires

September 30, 2017 02:47 ET (06:47 GMT)